Consumer Optimism and Saving Behavior

Abstract

This study examines the factors affecting household saving, extending previous research by adding measures of consumer optimism to the variables previous investigators used to analyze saving behavior. In addition to expectations about household income and the economy, we create an optimism variable related to life expectancy. The 1995-2007 Survey of Consumer Finances datasets were used. Two multivariate analyses show that including optimism variables in the model improved the explanation of household saving behavior. In general, those who are optimistic about future income, future economy, and life expectancy are more likely to be savers than are pessimistic individuals.

Keywords: behavioral life cycle hypothesis, life cycle hypothesis, saving behavior, self-control, Survey of Consumer Finances, optimism

JEL Classification: D12, D14, D91, E21